Why Kagi launched “no use, no pay”
Paying for a SaaS subscription you don’t use sucks. Sure, I don’t use that shameful cupboard with the ice cream maker, sous-vide device and electric ham-cutter either, but at least those things don’t charge me again!
In SaaS, billing is an underrated aspect of the customer experience. Money brings the customer-vendor relationship down to brass tacks. Even the friendliest customer support reps lose their charm if you feel like you’re getting ripped off.
The ad-free subscription search engine Kagi recently did the opposite: Buried in their changelog, they invested in their customers with a simple billing change that unexpectedly went viral. The change was simple: Kagi wouldn’t bill you if you didn’t use the product in a given month. No use, no pay.
The change didn’t even get its own blog article:
But the decision rippled outward from Kagi’s own Discord to social media and then to the top of Hacker news, from which the word spread to media sites including the Verge.
It caught our attention since we’re in the billing/pricing/monetization space and it was the first time we heard about something like this. It’s also a great example of how billing practices can make a real impact on your brand and positioning.
I sat down with Brandon Saltalamacchia who leads marketing at Kagi to chat about this update and its reception. Here’s what I learned from him:
Why Kagi decided to not charge users
As Brandon told me, the idea first came about from an idea session: “Our Founder Vlad is friends with an incredible marketer in the UK known as Rory Sutherland. They were on a call together brainstorming ideas and talking about their businesses when Rory suggested refunding users who don’t use our product in a month. A no use, no pay scheme.”
Generous schemes like this often look like marketing ploys. Any “no questions asked 100% money back guarantee” to me just reads like “refunding anyone who asks is cheaper than doing customer support”.
But I don’t have that cynicism with Kagi’s fair pricing. Had this been for marketing, it would have come with a launch, not buried in a changelog along with minor improvements.
I asked Brandon for the motivation behind this. He told me: “This billing strategy aligns with treating our customers like neighbors and there was no intention except for making customers happy.
We had zero conversations about how this would impact revenue, if it could reactivate dormant users or if it could increase new subscriber growth.”
There’s an interesting insight here: Business teams often start with the goal of increasing activation or mitigating churn or attract more users.
Fair pricing surely did all three for Kagi, yet it wasn’t the intention. Sometimes, just doing something people will obviously like is the right thing to do—whether or not there’s a business justification for it.
This would be harder to sell in a VC-funded startup (the only outside investors in Kagi are members of its own community). Kagi doesn’t need to grow at breakneck speed and show increasing numbers every quarter.
A caveat is that this is uniquely suited for search. It’s a product category that creates value through active usage, so this policy would be pointless for things that run in the background. You’d never expect to be refunded if your cybersecurity threat monitoring doesn’t detect anything in a month. You pay for that peace of mind!
Is this all a marketing scheme?
Then we were a little overwhelmed with the responses from around the world. We did not expect to see this reaction. In my mind this was a “small” feature, even though it took a few weeks to plan and implement, but looking back at it, it’s a huge feature and I wish we did it earlier.
It wasn’t a small project by any means, lots had to be done to make it a fluid experience for our users, down to the production of email copy, to making sure there are no bugs on our end with crediting back the cost.”
That’s what Brandon told me when I asked him about the marketing aspect of all this.
This last part is my favorite part of the interview. The idea sounds easy to build. But when building this, these things often run into issues with the billing system:
Do you want to refund the money or issue a credit for a free month?
If you want to issue credits, do you have a credit system?
With 3 paid plans, how do we account for credits for users on different plans?
What if someone upgrades their plan while still having a credit?
If a customer is on a yearly plan, do they pay less the next year, do they get a free month after their plan or can they withdraw the money?
These are just the first 5 things that come to mind—and I’m sure the team had to accommodate more edge cases.
Building all of this is why billing is important, but underrated. Flexibility to ship pricing/monetization updates requires a billing system that can accommodate all the cases without breaking anything.
Not having a flexible system means these kinds of updates take months to ship and require multiple engineers.
(Lago is that system and makes it easy to ship billing changes like that)
How Kagi benefitted from its billing change
When I asked Brandon about the results of this, he told me that “Most importantly, our current customers are very happy that this has been implemented. A very tiny % of our users forget to use our product in a single month, so it affects very little of our community, but it’s there as a safety net for our customers so that they can relax, knowing that should in the future they forget to use Kagi Search, we will look after them and credit their accounts.”
That’s in addition to the virality of this “little” update also brought in a lot of new customers who heard about Kagi for the first time because of the buzz. It also brought in customers who were previously on the fence who now felt safe that they weren’t taking a risk.
The day of the announcement marked their biggest single day of growth in 6 months.
Will this catch on?
I wondered whether this kind of practice could become more popular.
“A part of me wants to be optimistic about this, but unfortunately for a typical SAAS company it goes against their very nature to implement something like this, as it risks losing reliable recurring revenue, so I can’t see it being implemented by many anytime soon.”
I agree here. Most startups are struggling because they’re burning VC money or are barely kept afloat by ramen profitability. They won’t reject money a user is contractually obligated to give them.
That’s short-term thinking, of course. A user who pays for a product they don’t use will be frustrated and churn anyway, while someone whose account is more paused (they’re not paying) might come back.
If you’re focused on hypergrowth and report in 3-month intervals, the long-term trust gains don’t really matter.
Kagi can afford this because they go further than being bootstrapped and profitable: As a Public Benefit Corporation, not beholden to maximizing shareholder value.
That doesn’t mean that no use, no pay is a bad business decision. Ultimately, it sacrifices short-term revenue for long-term trust. And that matters most when you’re not looking for a quick acquisition or eyeing an IPO.